Business Consultants

Archive for February, 2010

Avoiding the top 7 business financing mistakes is a key component in business survival.

If you start committing these business financing mistakes too often, you will greatly reduce any chance you have for longer term business success.

The key is to understand the causes and significance of each so that you’re in a position to make better decisions.

>>> Business Financing Mistakes (1) – No Monthly Bookkeeping.

Regardless of the size of your business, inaccurate record keeping creates all sorts of issues relating to cash flow, planning, and business decision making.

While everything has a cost, bookkeeping services are dirt cheap compared to most other costs a business will incur.

And once a bookkeeping process gets established, the cost usually goes down or becomes more cost effective as there is no wasted effort in recording all the business activity.

By itself, this one mistake tends to lead to all the others in one way or another and should be avoided at all costs.

>>> Business Financing Mistakes (2) – No Projected Cash Flow.

No meaningful bookkeeping creates a lack of knowing where you’ve been. No projected cash flow creates a lack of knowing where you’re going.

Without keeping score, businesses tend to stray further and further away from their targets and wait for a crisis that forces a change in monthly spending habits.

Even if you have a projected cash flow, it needs to be realistic.

A certain level of conservatism needs to be present, or it will become meaningless in very short order.

>>> Business Financing Mistakes (3) – Inadequate Working Capital

No amount of record keeping will help you if you don’t have enough working capital to properly operate the business.

That’s why its important to accurately create a cash flow forecast before you even start up, acquire, or expand a business.

Too often the working capital component is completely ignored with the primary focus going towards capital asset investments.

When this happens, the cash flow crunch is usually felt quickly as there is insufficient funds to properly manage through the normal sales cycle.

>>> Business Financing Mistakes (4) – Poor Payment Management.

Unless you have meaningful working capital, forecasting, and bookkeeping in place, you’re likely going to have cash management problems.

The result is the need to stretch out and defer payments that have come due.

This can be the very edge of the slippery slope.

I mean, if you don’t find out what’s causing the cash flow problem in the first place, stretching out payments may only help you dig a deeper hole.

The primary targets are government remittances, trade payables, and credit card payments.

>>> Business Financing Mistakes (5) – Poor Credit Management

There can be severe credit consequences to deferring payments for both short periods of time and indefinite periods of time.

First, late payments of credit cards are probably the most common ways in which both businesses and individuals destroy their credit.

Second, NSF checks are also recorded through business credit reports and are another form of black mark.

Third, if you put off a payment too long, a creditor could file a judgement against you further damaging your credit.

Fourth, when you apply for future credit, being behind with government payments can result in an automatic turndown by many lenders.

It gets worse.

Each time you apply for credit, credit inquiries are listed on your credit report.

This can cause two additional problems.

First, multiple inquiries can reduce you overall credit rating or score.

Second, lenders tend to be less willing to grant credit to a business that has a multitude of inquiries on its credit report.

If you do get into situations where you’re short cash for a finite period of time, make sure you proactively discuss the situation with your creditors and negotiate repayment arrangements that you can both live with and that won’t jeopardize your credit.

>>> Business Financing Mistakes (6) – No Recorded Profitability

For startups, the most important thing you can do from a financing point of view is get profitable as fast as possible.

Most lenders must see at least one year of profitable financial statements before they will consider lending funds based on the strength of the business.

Before short term profitability is demonstrated, business financing is based primary on personal credit and net worth.

For existing businesses, historical results need to show profitability to acquire additional capital.

The measurement of this ability to repay is based on the net income recorded for the business by a third party accredited accountant.

In many cases, businesses work with their accountants to reduce business tax as much as possible but also destroy or restrict their ability to borrow in the process when the business net income is insufficient to service any additional debt.

>>> Business Financing Mistakes (7) – No Financing Strategy

A proper financing strategy creates 1) the financing required to support the present and future cash flows of the business, 2) the debt repayment schedule that the cash flow can service, and 3) the contingency funding necessary to address unplanned or unique business needs.

This sounds good in principle, but does not tend to be well practiced.

Why?

Because financing is largely an unplanned and after the fact event.

It seems once everything else is figured out, then a business will try to locate financing.

There are many reasons for this including: entrepreneurs are more marketing oriented, people believe financing is easy to secure when they need it, the short term impact of putting off financial issues are not as immediate as other things, and so on.

Regardless of the reason, the lack of a workable financing strategy is indeed a mistake.

However, a meaningful financing strategy is not likely to exist if one or more of the other 6 mistakes are present.

This reinforces the point that all mistakes listed are intertwined and when more than one is made, the effect of the negative result can become compounded.

Bimboism is rampant in today’s media climate where those who do get their fifteen minutes of fame squander it with empty words and idiotic antics. Think about how much of YOUR time is wasted when you watch TV, listen to the radio or read newspapers or magazines. How long do you stay with a story if it’s not pertinent to your interests or if the interviewee is dull? With so much competition for your attention it’s easy to move on to the next best thing.

If you don’t want to become the next bimbo and instead touch the hearts and the minds of the nation, here are three things to avoid.

1. Give a fatty bone.

The quickest way to lose interest is to ramble. When you can’t make your point succinctly your audience tunes out-literally. They change the channel or they shift their attention. To keep your audience jazzed respect their time by getting to the point of what they want to know. Give them value every second you’re speaking. Shave off any unnecessary fat and get to the bone, the real core of what you have to give.

2. Be professorial.

In my experience people who have the highest degrees are the biggest bores. They speak with the jargon of their industry or training using long sentences and obscure ideas. Simplifying is the key to communication. One of my favorite clients, syndicated technology columnist and national correspondent for KCBS news Larry Magid, is an exception. He can take the most complicated ideas and turn them into a Zen garden. He puts each word stone in the right place at the right time to create order, simplicity and understanding. Follow Larry’s path to your own garden by taking the big idea down to its roots. Refuse to be high fallutin’ by making your knowledge inaccessible to the masses.

3. Praise the Lord.

Preaching will set people hellbent against you. I don’t know about you but when someone tells me what to do I automatically rebel. Whenever you’re attached to an idea and try to push it on someone it’s natural to resist. When you have an agenda people sense it. If you’re unattached to the outcome your audience will be more receptive to you and your ideas. Allow them to make their own choices based on the information you impart. Tempt them with heavenly insights and offers.

Network marketing is a numbers game. The more people you introduce to your opportunity, the more money you’ll make. To start generating a steady stream of traffic to your site, try these 7 creative techniques:

1. Write and Distribute Articles, Reports and Ebooks. Internet users are all interested in one thing – information. Use this to promote your business by creating high quality content and allowing others to reprint it for you. One great way to do this is to distribute a brandable ebook or special report. This is one that a website or list owner can change to include a reference to their website. This doesn’t mean that it looks like they are the publisher, it’s just a way for them to include information on where the ebook was downloaded from and (if applicable) to include their affiliate link for your products and services.

2. Participate in Newsgroups, Forums, and Mailing Lists. There are hundreds of forums online and you can find one for almost any topic imaginable. Most allow you to include a signature line that will be attached to every message. This is a chance for you to advertise your site. Visiting these forums to post thoughtful questions and offer your expertise will mean your signature is viewed by others and will bring you free, targeted traffic. Of course how much traffic you get depends on how often you post and whether your signature makes people want to visit your site. A good approach is to use an ad you’ve had success with elsewhere as your signature.

3. Join Networking Sites to Build your Personal Network. Networking sites are designed to make it easy for people to meet others in their industry and to advertise their products and service. Similar to offline networking events where lots of people come together for the sole purpose of meeting people, online networking sites work the same way.

4. Use Classified Sites and Traffic Exchanges. Classified ad sites and traffic exchanges have gotten a bad reputation, but they really do work if you know how to use them. If you’re promoting a product or service that advertisers can benefit from then they’re a great place to get traffic. Although not very many consumers visit this type of advertising sites, lots of website owners do in order to make sure their ad appears on the site. While there they can’t help but notice other ads and if one catches their attention you’re likely to get a visitor.

5. Run a Contest. People love the prospect of winning something – that’s why a contest can be a great traffic generator. The key is to choose a prize that will attract people from your target audience. If you make the grand prize a new laptop you’ll get entries from everyone who would like to win a new laptop (which is basically every computer user in the world!). Get more targeted traffic by choosing something that your target audience is interested in but wouldn’t mean much to other people. To start promoting your contest do a search in Google for “Contest Directories” and you’ll find lots of places to list your contest for free.

6. Include a Powerful Signature on all Outgoing Email. Every time you send a piece of mail you have the potential to get a visitor to your site. Simply create a “signature” that is automatically added to every outgoing message. Use the signature to briefly explain what you do, give your USP or slogan and add a hyperlink to your site. Once it’s set up you don’t have to think about it again!

7. Try Newsletter Classified Ads. There are lots of newsletter publishers who give classified ads to new subscribers. Although these don’t typically bring a huge response, they can generate some traffic if you offer something with a high perceived value but low price tag. They’re also a great way to test new ads to see which ones get the best response. Once you’ve found a winner use it in a PPC campaign, make it your new email signature, run it as a top sponsor newsletter ad or use it as your forum signature.